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10/26/2008

Observations on the Milton Friedman Institute at the University of Chicago-Becker

Not long after the death of Milton Friedman in the fall of 2006, the president of the University of Chicago, Robert Zimmer, formed a committee drawn from the Economics Department, the Graduate School of Business, and the Law School. He asked the committee, which has Lars Hansen as chair and I am a member, to prepare a proposal for a large institute that would be named the Milton Friedman Institute (MFI) in honor of Friedman's long association with the University of Chicago. The president and committee considered this far preferable to naming the institute after a rich donor, which is the common practice.The committee presented a report early in 2008 to the Council composed of some faculty members at the University of Chicago. Apparently, not much opposition to the Institute was voiced at that Council meeting.
However, in late spring of this year a letter was sent to various members of the faculty and administration opposing the MFI. It was signed by about 100 faculty members and was made available to the press. This first letter was a confused combination of hostility to the economics department, hostility to market economics, objections to a few statements in the document supporting such an institute, and personal opposition to Milton Friedman, partly because of his alleged involvement in the Pinochet dictatorial Chilean government. Over time the reasons for the opposition were more carefully articulated, and the number of faculty signing the opposition to the MFI grew to over 150. Each succeeding letter became available to the media, and many articles began to appear in magazines and newspapers.
The latest statement of opposition mainly concentrates on whether it is appropriate to name such an Institute after Milton Friedman. I will address that issue in my discussion here. These comments are mainly taken from a statement I read on October 15, 2008 to a meeting of the whole faculty called by President Zimmer to discuss several issues, but especially the MFI. I elaborate in some places because our statements were limited to three minutes.
A university names an Institute after a former professor because of 1) his contributions to the university, 2) his contributions to scholarship or science, and 3) his intellectual honesty and character. On all three grounds I believe Milton Friedman eminently deserves having this Institute bear his name.
Let me first mention I knew him for over 50 years, first as a teacher, then as colleague and close friend. I admired him enormously at all these different stages.
His main direct contribution to the University of Chicago was as an absolutely superb teacher, by far the best teacher I ever had. He opened my eyes and that of other students, including Eugene Fama, James Heckman, Robert Lucas, and Lester Telser, and George Tolley, all faculty members at the University of Chicago, to how to use economic analysis to understand the real economic world. Both in the classroom, and as a supervisor of doctoral dissertations, he was a blunt and trenchant critic of shoddy analysis, both theoretical and empirical. I along with others took a lashing from him when he thought we did some analysis badly. The effectiveness of his teaching alone could merit having an Institute in his name at our university.
Many honors have recognized his enormous contributions to economic science. Equally important is that these have endured. A simple measure of that endurance is the large number of citations to his scientific work that still appear in the top economic journals. Only one or two other economists of his generation share this distinctive measure of longer run impact of their scientific work.
He was perhaps the most intellectually honest person I have ever known. To be sure, he was an active participant in public policy debates, as are many economists with very different points of view. But in his policy papers and discussions he used the same economics as he did in his academic work. He did not try to say things to curry political favor, and never held a position in Washington, except when he had a low level job at the Treasury department as a young economist. He attacked and defended persons of various political persuasions, including some of his best friends, if he believed their opinions or writings had flaws. He publicly criticized Arthur Burns, his teacher and close friend, when Arthur was chairman of the Fed, for supporting policies that Friedman considered bad economics. That public statement put enormous strains on their friendship. He is called a conservative, but he opposed many conservative positions, such as support for the gold standard, the military draft, and the war on drugs, and advocated many others that were picked up by liberals, such as the negative income tax, and attacks on corporate welfare through government subsidies to corporations.
One of the most persistent accusations is that he advised and collaborated with the Pinochet regime. In Two Lucky People, Rose and Milton Friedman's autobiography, he discusses his dealings with that government. He also includes the relevant documents so that readers can judge a lot for themselves. He turned down two honorary degrees from Chilean universities because they were state universities under Pinochet. He made one six-day trip to Chile in 1975 at the invitation of a private bank. He gave two lectures on the "fragility of freedom". He did have a brief meeting with Pinochet and wrote a letter to Pinochet afterwards urging "shock treatment" of reduced government spending and reduced growth in the money supply in order to cure the rampant inflation then afflicting Chile. His letter contains many detailed suggestions, including a call for "generous severance allowances" for laid off government workers, and a safety net to alleviate hardship and distress among the poor.
Friedman has also been criticized for helping to train some economists who served in the Pinochet government, even though teachers cannot control what their students do. Pinochet turned to the "Chicago boys"-economists trained at the University of Chicago- only several years after the centralized control of the economy that he favored had failed completely to lift Chile out of its doldrums. What is interesting in this regard is that the Social Democratic governments that followed the fall of the Pinochet government and the reintroduction of democracy have continued the vast majority of policies introduced by these Chicago-trained economists. These policies include low tariffs and a mainly free trade policy, privatized social security, and competitive private companies and universities.
As is well known, Friedman was a strong supporter of competitive market economies, but this was not defended by ideology. He used economic analysis to argue that this was the most effective way to raise the living standards of the world's poor. I strongly agree with him, and so do the great majority of economists in different parts of the world. To be sure, one can argue against this and other policy positions he took, but that is how intellectual progress is made on crucially important economic questions.
To summarize, great teacher for 30 years at the University of Chicago, outstanding researcher, and absolute intellectual honest in everything he did. To my mind these are far more than enough for faculty, students, and alumni associated with the University of Chicago, and for others as well, to be proud to have a Milton Friedman Institute at the University of Chicago.

Well said, Prof. Becker. You might also have mentioned that the University of Chicago already has a Fermi Institute and a Stigler Center, so the precedent for naming research institutes for highly distinguished faculty rather than big donors is well established there, to the university's credit.

I'm disappointed in Prof. Posner's implication that naming a research institute after Milton Friedman might have been a mistake, albeit one that would prove too costly to undo. Friedman's former colleagues and students have benefited immeasurably from the force of his intellect and from his perseverance in the face of intense criticism. It is altogether appropriate that they repay the favor now by emulating him rather than deploying lawyerly arguments that make expedient concessions to outright distortions of simple facts.

Nice article, it is important that the record be accurate. Prof. Becker not only understands Friedman's scholarship but was there with Friedman and can attest first-hand to his intellectual rigor and motivation.

I find it ironic that Friedman is often regarded in the popular press as some sort of 'corporatist' and manipulator [see Naomi Klein, for example], when the clear focus of his thinking was making life better for the 'ordinary' person [an adjective he used frequently] by minimizing state interference and maximizing personal liberty.

I have no doubt that many, if not most, of the opponents to the MFI have only a superficial understanding of Milton Friedman.

I agree with Professor Becker, and I hope that you and your colleagues persevere in this struggle to name the institute after Professor Friedman. In my opinion this institute should not be named after Friedman because of his ideology, but because of his immense contributions to the field of economics. The only thing that I would change is the purpose of the institute. I think that it would be beneficial to take out the part which states that it should be a free market oriented institute and replace it with a more neutral statement of purpose. Empirical work will continue to prove Friedman right, anyway.
On their website critics attack both Friedman's integrity and his scholarly work. The first line of attack seems rather distasteful, considering the fact that it is unrelated to their logic, which is essentially their fear of ideological dogmatism. Maybe they should take a lesson in effective debating from none other than Friedman himself, and focus on ideas rather than character. This way they only look like a bunch of unknown, envious academics, who fall far short of the man they criticize. The second line of the attack is, on the other hand, pretentious, considering the fact that they all know far less about economics than Friedman did.
In the end I just want to say that I find this opposition difficult to comprehend, especially considering that many of those who oppose it have taught me and seemed like a very reasonable, well educated and balanced people. I am sorry to say that their attack on Friedman's integrity, makes me sick and changes the way I look at many of them.

The opposition to Friedman, criticizing his "dogmatic" economic ideology or his tenuous association with Gen. Pinochet, is itself coming from a dogmatic ideological perspective. Whether you agree or disagree with Friedman, there is no question that he is one of the giants in his field. That alone makes him worthy of this honor.

1. As was pointed out in the first paragraph, the alternative often is to essentially sell the "naming rights" to a rich donor. That seems more a promotion of capitalistic values than honoring someone's life work. It really bugs me that the engineering school I graduated from has been renamed after a rich guy who, it turns out, is a dreadfully boring graduation speaker.

2. I admit I haven't read the case in detail, but the attempt to tie him to Pinochet seems about as tenuous as the the attempt to tie Barack Obama to Bill Ayers, just at a different end of the ideological spectrum.

well said! Friedman deserves it. Still, it was very surprising to me that Friedman has such opposition within University of Chicago. By the lukewarm endorsement of prof Posner, it seems that perhaps not all economists are thrilled with MFI either. It's very strange that people from schools all over the country envy UofC for having such an iconic and powerful thinker that represents intellectualism very well and yet some people within UofC are ashame of using his name.

I am a retired teacher of economics. When I was a student, Keynesian ideas held sway. Milton Friedman's challenge of those ideas were not well received by me at that time. As I grew older, I mellowed with time and began to appreciate his views better.
I have many differences with his ideas and significant reservations about his policy prescriptions even now. But I am unable to digest the idea that in USA there is opposition to the naming of an institute after him in the University where he taught for several decades.
Friedman is still respectfully remembered in India as among the finest thinkers of the last century. The University of Chicago should not go back on its decision to start the Miltnf Friedman Institute.

Professor Friedman was perhaps the most prominent economist of the 20th century. Naming of a single research institute will have little effect on that. I also consider the fact that he taught at Chicago well-known to anyone having at least some knowledge of the recent history of economics. Furthermore, the label "Chicago School" both in economics and anti-trust law is fairly telling in terms of geographical location. The name chosen for the institute seems a natural extension of the fame (or notoriety, if you will) of prof. Friedman as a staunch advocate of free markets. It is therefore hard to understand what the whole fuss is about.

I'm afraid that the underlying problem does not concern the merits or the character of prof. Friedman himself, but of those people whom received his ideas enthusiastically. The political right of the early 1980's in the US and the UK serves as the prime example. The writings by Hayek and Friedman which were aimed to a wider audience are now heavily associated with politicians such as Thatcher and Reagan, and for many this alone would be a good enough reason to question the achievements of those two economists. The political colouring attached to them is permanent, and popular books such as the recent one by Naomi Klein merely render this connection all the more stronger.

If the political influence of prof. Friedman's writings and his active promoting of certain political views is the problem here, this leads to the wider issue of how, if at all, economists should take part in political discourse. I believe that such active advocacy as prof. Friedman practiced is essential to sustain and develop the relevance of economic analysis in political decision making. However, one weakness of this approach is that the views of a distinguished professor and Nobelist might be by the general public perceived to represent the current state of the art as a codified and well-established whole, which is usually misleading. This danger is far less pressing when Einstein, for example, discussed in public his religious views, even though those views were in an anecdotal level linked to his opinions on quantum mechanics. In this context it is refreshing to see established economists publicly disagreeing on a variety of policy issues. This is preferable as long as giving two or more different sides to the same story doesn't mean allowing lousy arguments to be represented just for the sake of dialecticism.

As prof. Becker points out, Friedman's political stances and his work in economics were, if not indistinguishable from each other, at least very much intertwined in the sense that they were based on same analyses and approached equally vigorously. The whole MFI controversy proves yet again that curiosity and intellectual consistence can often lead a person to be deemed "controversial" (as the recent NY Times article on the MFI debate did). David Hume, one of the greatest inquiring minds in the history of Western thought pointed out that although he had "written on all sorts of subjects calculated to excite hostility, moral, political, and religious" he had "no enemies -- except, indeed, all the Whigs, all the Tories, and all the Christians". In comparison, the legacy of prof. Friedman seems surprisingly uncontroversial when assessed in light of his contributing to debate on many fiercely battled issues.

"Alleged" involvement? Becker, one is either involved or not involved with dictators. It is the case that Friedman was involved as Friedman himself points out in his own writings and that you later write in the post. So it is not "alleged". It is fact. Honestly, had Milton stuck strictly to economics, of which he was brilliant, and not worked alongside Pinochet, who was a tyrant, those who opposed the naming of the institution would have little to no grounds on which to stand. But that is not what transpired. He sullied his legacy. If one is not familiar with Pinochet, imagine if one substituted Saddam Hussein instead. There would no doubt be an uproar. Milton cannot preach individual freedom and government minimization on one hand and condone the murderous actions of a totalitarian regime. It makes a mockery of the concept of individual freedom and liberty.

Rather than correct "Publius" on his errors of fact, I'd like to address his deficient reasoning from those alleged facts. Suppose that an economist believes that the current policies in a country are odious in and of themselves and also deter economic progress. He also believes, on the basis of both theory and evidence, that a particular set of reforms will not only improve the country's economic situation but is also likely in the long run to undermine the ability of the current regime to continue its policy of repression. I pose the following questions to "Publius" and his ilk:

1) What is the logical basis for refusing to propose those reforms either in a public forum or directly to the government itself?

2) If that country did indeed implement those reforms and, 30 years later, was recognized to be the most prosperous and freest country in its hemisphere, on what basis could anyone denounce the economist who recommended those reforms?

As a matter of both logic and evidence, Milton Friedman's publicly-given policy advice during his one-week trip to Chile in 1975 should be considered only one of his innumerable contributions to the cause of human liberty and welfare. That it is instead used as a cudgel to hammer at the reputation of this great scholar and his legacy is yet another of the many indicators of the intellectual, moral, and ethical bankruptcy of the contemporary left.

Bill, In certain circles they were know as the "Chili Boys". As for Chile and Pinochet (hey! that rhymes!) in order to preserve order and liberty there are times that one must deal with the Devil. Given the scale and conditions, where else could the experiment have been run? Good science requires that any theory requires empircal testing. And sometimes the "Shadow" knows and takes covert action.

Let's say Kim Jong Il called up Prof. Becker one day and said, "Professor Becker, I have read some of your books, and I learned a lot about free markets and economics from them. While my country has always been Communist, I see the continual poverty of my people and wonder if some free-market reforms might help. I invite you to come to North Korea to discuss some of your ideas with me and members of my government. If you have some specific policy prescriptions, we would be glad to hear them. Of course, I do not plan on giving up dictatorial control over my country, and I would be very displeased to hear of any recommendation that I cede authority or institute some kind of republican form of government here. Thus, my only condition is that you focus your ideas on economics and markets. Are you willing to help?"

Here are Professor Becker's possible responses:

A. "No. I do not work with dictators and other totalitarian thugs."

B. "I would, but only under the condition that you allow me to criticize you, your form of government and the general travesty of Communist rulership. Since you have already said that is a deal-breaker, then I guess my answer has to be no."

C. "Yes. I do not like that I can only speak to certain things, but I would rather do what I can rather than do nothing."

Which is the most desirable response?

Quite frankly, I think C has to be the best answer here. Spreading some pro-freedom reform in an oppressive country is better than doing nothing. While it may be better for one's free-market bona fides to never associate with totalitarians, the potential to improve the lives and freedoms of those in an oppressed nation certainly must weigh heavier than the opinions of your critics. It's not every day that a totalitarian is willing to reach out to pro-free market ideas, so when the opportunity is presented I would think that folks like Prof. Becker would take up the offer, despite the unsavoriness of the dictator on the other end, in order to do some good.

How about if Kim Jong Il said "My friends and I are not making enough money shooting and brutalizing the population, dear Dr Friedman would you come over and show us how we can exploit them more efficiently and effectively?" Surely this is more along the lines of Pinochet request for help? But didn't Milton start training the "Chili Boys" with the CIA and US Military well before the glorious (counter-)revolution which overthrew with extreme violence a democratically elected government? And what evidence that Milton even said to them, you can start by not dropping your opponents out of helicopters? Lets face it. The evil dwarf was warped morally and intellectually. If you have a Milton Friedman Institute why not one to celebrate Stalin or Hitler while you are at it. Let the dwarf rest in peace and why not have a truly interdisciplinary institute now that people are beginning to reject the "Chicago School" economics and are looking for something more reality based. Work more along the lines of Heckman, rather than the flights of fancy of the other faux Nobel laureates who were probably only awarded the prize because they are members of the sinister Mont Pelerin Society. And why if these people are so interested in freedom including freedom of thought and ideas do they work so hard at suppressing all intellectual opposition to themselves. Humorously, the way they behave is more like Communists than the liberals they claim to be. The so-called Chicago School should more appropriately be called the Chicago Collective. Just like a Communist Collective see the vehemence with which they turn on someone, like Heckman, who dares to vary from the party line. No compromise, no prisoners, and no thought unauthorized by the collective is tolerated.

That was the first time I'd seen anything by Friedman explaining what was and what was not his involvement with Pinochet. To Publius: I don't understand your point. Pinochet was harming his people through his hyperinflationary policies, was he not? So why can't Friedman get credit for trying to minimize that harm by giving him sound counsel? Are you making the argument that b/c Friedman helped him kill hyperinflation in Chile, that it enabled Pinochet to be even crueler to the Chileans than he would've been had the hyperinflation not been allowed to continue? If that's your argument, I would appreciate hearing more of it, because that is the only way I can imagine your criticism of his involvement with Pinochet as holding any water - that his help actually harmed the Chileans more than had they done nothing at all. That's not impossible to imagine, but I just was hoping you could explain why you think that way if so.